Oil Hits $80, time for the Energy Select Sector SPDR (XLE)?

The Energy Select Sector SPDR (NYSE:XLE) is looking tempting right about now, as oil hits $80 a barrel, and Oil Demand is expected to rise.

In a recent memo, the International Energy Agency indicated that global oil demand is expected to rise at a higher rate than previously anticipated over the next year as the economic recovery moves along.

World demand for 2009 is expected to be 84.6 million barrels per day, an increase of 200,000 barrels from the previous forecast but still 1.7 million barrels below 2008 levels. “Things are looking better from an economic perspective,” said David Fyfe of the IEA, an energy adviser to the U.S. and other oil-consuming nations.

Beyond 2009, demand is expected to rise on the strength of emerging market economies, particularly China. Crude consumption is expected to increase 1.4 million barrels per day to 86.1 million. While this represents significant growth from 2009, such demand would be on par with 2007-2008 levels

The XLE deos not invest directly in commodity futures - rather, it invests in companies engaged in the oil and gas industry. XLE’s largest holdings include Exxon Mobil (19.2%), Chevron (12.7%), and Schlumberger (6.7%).

Exxon shares are still well below 2008 highs. If Oil keeps trending updwards, look to the XLE for a diverse energy sector play.